Refrence Deegan. (2016). Financial Accounting . McGraw-Hill Education, Australia Milk Park Ltd is re


Deegan. (2016). Financial Accounting . McGraw-Hill Education, Australia

Milk Park Ltd is retailing company which commenced operations on the 1st of July 2018. At the financial year end 30th June 2019, the firm furnished its statement of comprehensive income and the statement of financial position as follows: Statement of Comprehensive Income for the year ended 30 June 2019 2$ 2$ 1,144,000 (475,500) 668,500 85,000 753,500 Sales Revenue Cost of sales Gross profit Other income: interest income Less operating expenses: Administrative expenses Wages and salaries Warranty expenses Long service leave expenses Doubtful debt 143,320 80,180 27,000 55,000 18,000 65,400 88,500 94,000 Insurance expense Utilities expenses Depreciation expense Profit before tax 571,400 182,100 Statement of Financial Position as at 30th June 2019 Non-current asset: Plant and Machinery – cost Less accumulated depreciation Land – fair value 564,000 94,000 470,000 125,000 595,000 Current assets: Cash 105,000 65,000 230,000 31,700 431,700 Inventory Account receivable – net Insurance prepaid Current Liabilities: Account payable 156,000 28,200 27,000 15,000 38,500 Accrued wages and salaries Provision for warranty expenses Provision for long servi Rent income paid in advance Net working capital leave (264,700) 167,000 762,000 Non-current liabilities: Loan payable (163,500) Net assets 598,500 Additional Information 1.During the financial year ended 30m June 2019, Milk Park Ltd received rental revenue of 38,500 which relates to the following financial year. The related revenue is taxable by the ATO when the amounts are received. 2. All administration and salaries expenses incurred have been paid except for $28,200 accrued wages and salaries as at year end. Wages and salaries expense are deductible for tax purposes when paid. 3. The warranty expenses incurred during the period remained unpaid as at year end. Warranty expenses are allowed for deduction when paid for tax purposes. 4. Out of $55,000 incurred as expense for long service leave, only $40,000 had been paid as at year end. This is allowed for deduction only when actually paid. 5. Only bad debts are allowed as deductibles for tax purposes. 6. Insurance expense charged for the period represents the portion of the total prepaid amount which had been used during the year. $31,700 of the prepaid amounts has not been used as at year end. Insurance expenses are deductible when paid. 7. The plant and machinery are depreciated over six (6) years for accounting purposes while its useful life is estimated to be four (4) years for tax purposes. 8. The applicable tax rate for Milk Park Ltd is 30% 9. Land had an initial cost price of $100,000 before it was revalued to its fair value at end year. Required: a) Prepare the reconciliation to determine taxable income. b) Complete the Deferred Tax Worksheet and journal entries to adjust deferred tax accounts and recognise current tax at 30th June 2019

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